Antitrust Exemption

An Antitrust Exemption and a Changing Business Model

Antitrust laws are designed to prevent restrained trade in interstate commerce. However, there are several antitrust exemptions that were covered under the Clayton Act of 1914. The two most important aspects of the exemptions are the labor exemption that covers labor unions from being defined as monopolies and the non-statutory labor exemption that protects union activity as being defined as antitrust.

Why Labor Unions are Exempt from Antitrust Laws?

The main antitrust exemption deals with the formation of labor unions. Unions are designed to protect employees from unfair business practices. Therefore all picketing and boycotting that a labor union endorses are exempt from antitrust enforcement. These groups are also able to collectively bargain for employee wages and benefits. This bargaining power helps laborers get a better deal. However, any action or agreement between a union and a non-labor party is not exempt from these laws.

Non-Statutory Labor Exemptions

A non-statutory antitrust exemption more frequently applies to sports. This gives sports associations the ability to collectively bargain without fear of reprisal for collusive or anticompetitive behavior. For example, if there is a salary cap that is agreed upon by management and the union, it will not be in violation of the antitrust laws. Prior to 1998 only baseball had a blanket exemption though and other sports were the focus of several antitrust actions.

Health Care Exemptions and Proposed Changes

Another place that an antitrust exemption can be found is in healthcare. The 1945 McCarran-Ferguson Act provides a targeted exemption for certain insurance activities. Like many other laws though, it has been the subject of intense debate for year and the House may soon overturn it in the hopes that creating more competition amongst insurance companies would decrease out-of-pocket costs for consumers. Many experts feel that this will not work as states are already able to regulate this industry.

Examples of Exemptions in Sports

Many of the most famous antitrust exemption problems are in sports. With the popularity of baseball in American culture they shaped the 1922 Supreme Court ruling on the inapplicability of antitrust laws when applied to baseball. Meanwhile other sports including football, basketball and hockey have had difficulties in relocating franchises in difficult economic times due to the laws prior to 1998. In more recent years this has changed however and now leagues can thwart problems with teams or players without fear of repercussion.

These exemptions in antitrust law were created for several reasons. For sports teams, the argument was made that they were more like civic organizations than businesses. Because many of the laws were created prior to million dollar salaries and televised events, this made sense and an exemption was allowed. It is also felt that groups that are exempt from the laws do not fix their prices or become any less competitive for the exemption. Because the business model changes over time, these laws are also subject to change as well and many lawmakers are working to fix deficiencies in current antitrust legislation.